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Wednesday, December 3, 2014

How goes the war on drugs? On the face of it, not well. But in thinking
about the drug problem it helps to know a bit of economics. When you do,
you see things aren't as bad as they seem.

Most people agree that the
use of heroin, cocaine and amphetamines such as speed and ice can
become highly addictive and, when they do, a lot of harm is done to
users and their families.

So most of us agree that governments
should be working to limit the use of such harmful drugs. The arguments
come over how best to do it. The conventional approach is to make the
production, importation, distribution, sale and consumption of such
drugs illegal. Problem solved.

But we've been pursuing this
prohibition approach for years, spending a fortune on policing, the
courts and the high proportion of drug offenders in our jails. With all
this has come a fair bit of police corruption.

And yet illegal
drug use remains widespread, with still too many drug overdoses and drug
deaths. The seizures, arrests and prison sentences roll on, seemingly
to little effect. People may be using less heroin, but its place has
been taken by ice which, if anything, seems worse.

If prohibition so clearly isn't working, shouldn't we try a different approach?

Last
week the NSW Bureau of Crime Statistics and Research published research
that seems to provide powerful support for the contention that the
conventional approach is broken.

We've all seen TV news reports of
police proudly displaying the seemingly huge quantity of drugs they've
just seized after an intricate detection operation. We're told the
"street value" of the seized drugs, with the implication that this
success will put a hole in drug consumption.

The take-away message is clear. See? The tide has turned and we're winning the war after all.

But
the study took the figures for seizures and arrests of suppliers of
illegal amphetamines, cocaine and heroin, and compared them with the
figures for two indirect measures of drug use: hospital emergency
department admissions for drug overdoses and arrests for drug use or
possession. The figures were for the whole of Australia, over the 10
years to June 2011.

The study found no evidence that increases in
drug seizures and arrests of drug suppliers reduced the number of
emergency department admissions or the number of arrests for use or
possession.

The study also analysed three specific NSW police
operations - named Balmoral Athens, Tempest and Collage - identified by
the NSW Crime Commission as being so successful they had the potential
to affect the market for cocaine.

It found that the operations did
have the effect of reducing arrests for use or possession of cocaine,
but that effect was only temporary.

In fact, the study found that
increases in drug seizures were often associated with increases in
hospital admissions and arrests of users. Huh? The likely explanation is
that at times when there is a lot more of the drugs available, the
police will be able to increase the amount they seize.

What more
proof do you need? Prohibition isn't working and we should try something
else. Many medical people would like to see less emphasis on
criminalisation and more on harm reduction. Just imagine if we could
take all the money poured into catching and punishing people and use it
to help people get off drugs and sort out their lives.

But Dr Don
Weatherburn and the other authors of the study argue strongly against
using its findings to conclude that drug law enforcement is a waste of
money.

Why not? Because, when you look at the issue the way an
economist would, you realise there's more to prohibition than just
attempting to stamp out all illicit drug use.

The other thing it
does is force up the price of drugs. Research suggests the black-market
price of cocaine in the US is between 2 1/2 and five times what it would be
in a legal market. For heroin it was between eight and 19 times higher.

Economists,
as you know, are great believers in the power of prices, and in using
prices to change people's behaviour. There's little reason to doubt that
the high price of illegal drugs hugely reduces the number of users and
the amount each user uses.

Before we write off prohibition we need
to consider what economists call the "counterfactual": what would the
world be like if these drugs weren't outlawed? Far more people would be
using them and the amount of harm needing to be reduced would be
infinitely greater.

But the law enforcers need to remember what it
is that's keeping the price of drugs so high. It's obviously not their
success in greatly limiting the supply of drugs relative to the demand.

No, it's the high incomes drug producers and traffickers need to earn to
induce them to run the great risk of imprisonment that working in this
industry entails. As an economist would think of it, it's the big "risk
premium" suppliers add to the prices they charge that keeps prices so
high.

This suggests that rather than trying to maximise the size
of the seizures they can parade on telly to prove how successful they
are, law enforcers should maximise the risks of traffickers getting
caught, thereby inducing them to charge a higher risk premium.